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Highlights

The AICPA Auditing Standards Board issued three exposure
drafts. A proposed Statement on Quality Control Standards
(SQCS), A Firm’s System of Quality Control, will replace all
existing SQCSs and provide guidance for a CPA firm’s responsibilities
for its system of quality control over its accounting and auditing
practice (
www.aicpa.org/download/members/div/auditstd/ed_sqcs.pdf). The ED,
which should be read in conjunction with the AICPA Code of
Professional Conduct, describes elements of quality control and other
matters essential to the effective design, implementation and
maintenance of the system. It also explains how the proposed guidance
differs from existing SQCSs and international standards on quality
control. Comments are due September 30, 2006.

Comments on two other EDs are due September 15, 2006. One, a
proposed Statement on Standards for Attestation Engagements
(SSAE), SSAE Hierarchy, identifies the body of attest
literature, clarifies the authority of attest publications issued by
the AICPA and others, and provides additional guidance on related
matters (
www.aicpa.org/download/members/div/auditstd/finaledssaehierarchy.pdf).
Another, a proposed Statement on Auditing Standards (SAS),
Omnibus—2006, includes proposed revisions to SAS nos. 102,
Defining Professional Requirements in Statements on Auditing
Standards; 105, Amendment to Statement on Auditing
Standards No. 95; 109, Understanding the Entity and Its
Environment and Assessing the Risks of Material Misstatement;
110, Performing Procedures in Response to Assessed Risks and
Evaluating the Evidence Obtained; 99, Consideration of
Fraud in a Financial Statement Audit; and 103, Audit
Documentation (www.aicpa.org/download/members/div/).

Conrad W. Hewitt, CPA, became the SEC’s chief
accountant in August. He was a chief financial regulator for
the State of California and, earlier, a longtime managing partner of
Ernst & Young. Hewitt’s priorities include leading the SEC’s work
on implementing the Sarbanes-Oxley Act’s internal control provisions
and promoting convergence of U.S. GAAP and international financial
reporting standards.

The SEC issued a concept release to
elicit public comments on the guidance it is developing to help
managers of public companies, both domestic and foreign, assess their
internal controls over financial reporting (
www.sec.gov/rules/concept/2006/34-54122.pdf ). In particular, the
guidance will address how to identify risks to the accuracy of
financial statement accounts and disclosure and the related internal
controls that address those risks; the objectives of the evaluation
procedures and methods or approaches management uses to gather
evidence supporting its assessment; factors management should consider
to determine the nature, timing and extent of its evaluation
procedures; and documentation requirements, overall objectives of
documentation and factors that may influence documentation
requirements. Comments are due September 18, 2006.

The IRS sought recommendations from the public
on how to make it easier and less expensive for Americans to
satisfy their federal tax obligations. The service’s Office of
Taxpayer Burden Reduction encouraged tax practitioners, business
owners and others to submit proposals on form 13285A (
www.irs.gov/pub/irs-pdf/ ).

FASB issued Interpretation no. 48, Accounting for Uncertainty in Income Taxes, which prescribes
a consistent recognition threshold and measurement attribute for
application in a financial statement to a position taken or expected
to be taken on a tax return (
www.fasb.org/st/summary/finsum48.shtml ). The interpretation also
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.
It is effective for fiscal years beginning after December 15, 2006.
FASB encourages earlier application by enterprises that have not
issued any financial statements in the period in which they adopt the interpretation.

The board also issued a staff position (FSP) that will require
companies to recalculate their leveraged leases if there is an actual
or projected change in the timing of cash flows related to income
taxes generated by the leveraged lease (
www.fasb.org/fasb_staff_positions/fsp_fas13-2.pdf ). The guidance
in this FSP amends FASB Statement no. 13, Accounting for Leases,
and is applicable to fiscal years beginning after December 15, 2006.

The challenges of the new lease accounting standard have been pervasive to say the least. In this free, independently-written report, you'll learn effective adoption strategies as well as resources for easing the transition to the new standard.